SolarMax Technology(US:SMXT)2025-08-14 21:11Part I. Financial Information Item 1. Unaudited Financial Statements The unaudited financial statements for the six months ended June 30, 2025, show a significant increase in revenue and a substantial reduction in net loss compared to the same period in 2024, primarily due to a non-recurring stock-based compensation expense Condensed Consolidated Balance Sheets As of June 30, 2025, total assets slightly decreased to $38.2 million, while the company reported an increased working capital deficit of $18.3 million and a total stockholders' deficit of $15.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,916 | $786 | | Total current assets | $21,542 | $20,950 | | Total assets | $38,244 | $38,630 | | Liabilities & Equity | | | | Total current liabilities | $39,798 | $34,740 | | Total liabilities | $53,351 | $53,709 | | Total stockholders' equity (deficit) | $(15,107) | $(15,079) | - The company's working capital deficit increased to $18.3 million as of June 30, 2025, up from $13.8 million at year-end 2024, primarily due to an increase in current liabilities like accounts payable and the current portion of secured convertible notes1443 Unaudited Condensed Consolidated Statements of Operations For the six months ended June 30, 2025, revenues increased 35.2% to $13.8 million, and the net loss significantly improved to $3.2 million from $21.4 million, largely due to the absence of a prior-year stock-based compensation expense Statement of Operations Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenues | $13,810,473 | $10,218,375 | | Gross Profit | $2,023,632 | $123,676 | | Operating Loss | $(2,924,198) | $(21,280,308) | | Net Loss | $(3,195,019) | $(21,436,011) | | Diluted Loss Per Share | $(0.07) | $(0.50) | - A significant stock-based compensation expense of $17.2 million was recorded in the six months ended June 30, 2024, which was the primary driver of the large net loss in that period, with no such expense recorded in the 2025 period1726204 Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities substantially improved to $0.4 million, while financing activities provided $1.6 million, leading to a $1.1 million increase in total cash Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(380,432) | $(8,022,213) | | Net cash provided by (used in) investing activities | $137,509 | $(7,673,749) | | Net cash provided by financing activities | $1,553,056 | $14,216,118 | | Net increase (decrease) in cash | $1,131,129 | $(1,220,462) | Notes to Unaudited Condensed Consolidated Financial Statements The notes disclose a going concern warning, the impairment of all goodwill in 2024, details of financing arrangements, and a major subsequent $127.3 million EPC contract, clarifying the company's single reporting segment - Management has identified conditions that raise substantial doubt about the Company's ability to continue as a going concern, citing a history of net losses, negative operating cash flows, and significant current debt414243 - The company's China segment has not generated any revenue since 2021, and all goodwill ($7.5 million) associated with these operations was fully impaired during the year ended December 31, 20243261149 - Subsequent to the quarter end, on July 31, 2025, a subsidiary entered into an EPC contract to develop a battery energy storage system (BESS) facility, expected to generate approximately $127.3 million in revenue220 - The company has determined it has only one reporting segment, the United States, as of January 1, 2024, because the China operating segment has not had significant operations since 2022215 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of tariffs, the expiring federal solar tax credit, and California's NEM 3.0 policy on residential solar demand, while highlighting revenue growth driven by a new dealer network and a significant BESS contract - The federal residential solar tax credit is set to expire on December 31, 2025, which may significantly reduce the incentive for residential users to install solar systems226 - California's NEM 3.0 policy, effective April 2023, reduced export rates for solar energy, leading to a slowdown in residential demand and causing the company to lay off approximately 25% of its residential design and installation team in January 2024233234 - A new dealer network program, started in late 2023, has become a significant revenue driver, accounting for approximately 48% of revenues in the first six months of 2025, up from 11% in the same period of 2024242243 - The company entered into a major EPC contract for a BESS facility in Texas, expected to generate revenues of approximately $127.3 million and be completed by June 2026, representing a strategic move to offset declines in residential solar sales240249 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this item is not applicable for the registrant - This section is not applicable for the registrant313 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report314 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls315 Part II. Other Information Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first half of 2025, the company issued 3.3 million shares of common stock in unregistered sales for $2.85 million, and utilized approximately $18.6 million from its March 2024 IPO for investments, working capital, and debt payments - In Q1 and Q2 2025, the company sold 3,319,682 shares of common stock for $2.85 million in a private placement to accredited investors, with shares issued at a 25% discount to the market price318 - Net proceeds of approximately $18.6 million from the initial public offering were partially used to invest $7.0 million in a promissory note from Webao Limited and approximately $0.7 million in a note from Qingdao Xiaohuangbei Technology Co., Ltd, with the remaining balance used for working capital and debt repayment320321 Item 5. Other Information The company reported a change in its independent registered public accounting firm from Marcum LLP to CBIZ CPAs P.C., and CEO David Hsu agreed to defer his $2.5 million deferred compensation payments to December 31, 2025 - On April 29, 2025, Marcum LLP resigned as the company's independent registered public accounting firm, and on May 5, 2025, CBIZ CPAs P.C. was engaged323 - CEO David Hsu agreed to defer payment of his deferred compensation totaling $2,493,282, with payments, originally set to begin on June 30, 2025, now commencing in twelve monthly installments starting December 31, 2025324 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including a letter agreement regarding deferred compensation for the CEO and Sarbanes-Oxley Act certifications